Oil Prices Drop On Iran Nuclear Accord

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London (AFP) – World oil prices slid on Monday after a U.S.-led deal was struck between world powers and Iran on the Islamic Republic’s controversial nuclear program.

Brent North Sea crude for delivery in January shed $1.82 to stand at $109.23 a barrel in London midday deals.

New York’s main contract, West Texas Intermediate (WTI) for January, retreated $1.36 to $93.48 a barrel.

“The main focus at the start of the week is the interim U.S.-Iran deal which was concluded at the weekend,” said Neil MacKinnon, analyst at VTB Capital financial group.

“The immediate impact has been felt on the oil price, which has moved lower, unwinding some of last week’s gains… Were this move to be sustained, it would provide a positive knock-on effect in terms of U.S. economic growth though this might only hasten the Fed’s move to an early tapering of its bond purchases,” he added.

Major crude producer Iran on Sunday agreed to curb its nuclear program for the next six months in exchange for limited sanctions relief, in a preliminary accord with world powers meant to lay the foundations for a comprehensive agreement later this year.

“Brent had rallied last week in response to market talk that the negotiations weren’t going so well, and what we see right now is a downward correction of prices after the deal,” said Victor Shum of IHS Purvin and Gertz consultants.

“The impact of the deal on global oil supply will however be limited since much of the sanctions continue to remain in place,” the Singapore-based analysts told AFP.

Tan Chee Tat, an investment analyst at Phillip Futures in Singapore, said WTI was less affected by the deal as any potential influx of Iranian oil into global markets will mainly soften Brent.

“Brent and Iran crude oil are catered to the same regional clients. As such, the news had a greater negative impact on Brent crude instead of WTI crude,” he said.

The deal was reached following marathon talks in Geneva between Iran and the so-called P5+1 nations comprising the United States, China, France, Britain, Russia and Germany.

The West and Israel suspect Iran is pursuing a nuclear weapons capability alongside its uranium enrichment program, which Tehran insists is entirely for peaceful purposes.